WHAT can we expect to see in the trailer business in the next few years? Based on the perspective of executives from America's two largest trailer manufacturers, look for strong sales, an array of product innovations, and closer ties to international markets.
That seemed to be a common thread in the presentations that executives from Great Dane and Wabash National gave at the recent ACT Research seminar in Columbus, Indiana.
The event, held just ahead of and just up the road from the Mid-America Trucking Show, was a two-day event featuring economic outlooks, truck and trailer forecasts, and multiple sessions on alternative fuels for trucks.
Of special interest to those involved in the truck trailer market was a detailed session that featured insights from Dean Engelage, executive vice-president of sales and strategic planning for Great Dane, and Dick Giromini, president of Wabash National.
“My sense and the sense of our team is that we are in the middle innings of a nice run,” Engelage said. “Whether we get back to the highs of 1999 and 2006 is anyone's guess. We think the rest of this year will play out pretty nicely.”
Great Dane expects trailer production to be in the range of 250,000 trailers in 2013.
“Beyond 2013, there are so many ‘what ifs’ out there. But I personally believe that 2014 will be just as good if not better than 2013.”
“We believe the trailer market will be well above replacement levels for the next several years. This year certainly will be equal to or greater than last year.”
One reason for the bullish outlook is that trailers just aren't getting any younger. The typical trailer today is more than eight years old. The average age of a trailer has never been appreciably greater than it is right now.
Giromini pointed out that the age of the fleet is only part of the story. Even more significant, he said, is the fact that under a normal 8-10 year trade cycle, the huge numbers of trailers sold between 1998 and 2000 would have been traded in beginning in 2008. Instead, that trade cycle coincided with perhaps the most severe downturn in industry history. Only 350,000 trailers were shipped during that period. The result, according to Giromini's calculations, is a shortfall of 500,000 trailers.
“Those trailers built in 1998-2000 are now in their teenage years, and we know how ornery teenagers can get,” Giromini said. “Fleets will need to replace this equipment to improve utilization, uptime, and keep maintenance costs down.”
Reasons for optimism
Other factors also should help demand for trailers to remain strong.
The second most important factor is CSA 2010, Giromini said. This regulation keeps safety scores on both the fleets and the drivers. Points accrue to the driver of faulty equipment, which can lead to the loss of the driver's license. As a result, drivers want to drive for fleets with younger equipment, and fleets want to attract and retain the safest and most reliable drivers.
Additionally, the Tax Relief Act of 2010 has been extended to provide depreciation provisions through 2013. Fleets can expense up to 50% of certain capital investments made during the course of the year. Maximizing tax benefits this year is an additional incentive for fleets to buy trailers this year.
Hours of Service rules have decreased fleet productivity, making it necessary for more trailers to carry the same amount of freight.
All of this is dependent on the overall health of the general economy. But if the economy remains even marginally healthy, these demand drivers lead us to believe that this could be one of the longest and strongest cycles in our industry's history.
A huge impact
Engelage said the severity of the 2009 downturn has affected how trailer customers make purchasing decisions.
“Trailer customers are now looking at total cost of ownership operating costs and lifecycle costs more than ever before,” he said. “They also want to buy from a company that is easy to do business with. That may sound trite, but it's something we have spent a lot of time analyzing — making sure our costs are in line and that it is easy for trailer customers to do business with Great Dane.”
Engelage cited moves Great Dane has made to upgrade its website and rebranding its trailers in order to simplify the buying process. The company also has strengthened its distribution system to provide customers with greater support after the sale.
Our parts and service network helps, as does our engineering, and the functionality of our website,” he said. “We have dropped Trailers from our name because we are more than a trailer company. We have updated the brand and changed our products.”
The severe downturn the industry experienced affected everyone. Here are some of the things that Great Dane and Wabash to strengthen themselves and return to prosperity:
Great Dane made some major acquisitions.
“We have made a lot of investments in the industry the past three years, including the acquisition of Johnson Truck Bodies,” Engelage said. “While not a trailer manufacturer, Johnson allows Great Dane to diversify its refrigeration technology.”
Great Dane also decided to grow globally, investing in Ice Bear, a refrigerated truck and trailer manufacturer based in China.
“We decided that this was a good strategic decision that will allow us to take advantage of the growth in what is now an undeveloped cold chain in China.” Engelage said, referring to the transportation of food as well as pharmaceuticals.
The company also solidified its production of refrigerated trailers back home. The new Great Dane plant in Statesboro, Georgia, has a capacity of 5,000 trailers annually.
“We consider it to be the most technologically advanced refrigerated trailer plant in the world,” Engelage said. “Automated assembly operations, streamlined process flow, robotic welding, information technology that is pushed to the plant floor. Everything that we know that has been successful in our other plants went into Statesboro.”
Great Dane now has eight plants, more than 100 dealerships and factory branches. The extensive network of dealerships and factory branches helps the company reach customers in South America, Mexico, and Canada.
A new Wabash
The past few years have been transformational for Wabash, a company known for manufacturing dry-freight vans for large fleet customers. Indicative of its efforts to diversify, the company also makes clean room equipment for pharmaceutical companies.
“We have gone from vans to a much wider, diversified industrial manufacturer,” Giromini said.
Wabash has been on a shopping spree in recent years, acquiring brands such as Benson and Transcraft platform trailers, along with tank brands such as Beall, Progress Tank, Walker, and Brenner.
Wabash ought the Walker Group in 2012 and acquired a portion of Beall this year.
The company also has made changes to its bread-and-butter dry-freight trailers.
A DuraPlate composite roof system for LTL applications that eliminates roof bows and ceiling liners in the interior. This increases roof strength, eliminates maintenance costs, and increases cube capacity.
A new door system that offers a 110-inch maximum door opening, comparable to that of a swing door opening. This enables fleets to transfer loads from one trailer to the other without having to break down pallets.
Increased use of bonding. Wabash also has introduced bonded roofs and DuraPlate sidewalls to eliminate rivets. This provides a variety of advantages, including elimination of potential leak points and creating a smooth surface for the application of graphics.
“We believe bonding makes perfect sense for the next generation of trailer construction,” Giromini said.
“The last few years have been anything but easily. We are a very different company than they were a few years ago,” Giromini said. “Today we have nearly 6,000 associates, plants in six states along with Mexico and the UK, and 18 service centers across the US.”
Like Great Dane, Wabash is looking to market its products internationally.
“From a global perspective, trailer manufacturing can be challenging,” Giromini said. “There are a number of barriers to entry. Manufacturing in the US and shipping globally can be cost prohibitive. Every country has different equipment regulations and, depending upon the infrastructure, different performance requirements.”
In spite of the challenges, Wabash was able to introduce refrigerated vans to the Australian market in 2012.
“We continue to meet with foreign trailer manufacturers to identify opportunities for global growth,” Giromini said.
Helping customers save fuel
One of the major needs for trailer customers in this age of high diesel prices is fuel savings. Not surprisingly, it's an area that trailer manufacturers are addressing. Reducing aerodynamic drag is first on the list.
“From a trailer perspective, aerodynamic devices have proven to deliver the largest improvement in overall fuel economy,” Giromini said. “We are exploring every option available when it comes to trailer aerodynamics.”
Trailer skirts — have delivered up to 7% improvement.
Low-rolling-resistance tires on tractor and trailer provide up to 3% improvement in fuel economy. Wide-based tires provide up to a 5% improvement.
Tire inflation systems can ensure that tires are properly inflated, avoiding the negative impact of under-inflated tires.
Aerodynamic devices at the end of the trailer can improve fuel economy by up to 6%.
Under-tray devices designed to direct airflow away from trailer understructure and running gear, are reported to achieve a 5-10% reduction in fuel consumption.
All of these fuel savings are based on the estimates of others, Giromini said. However, he said Wabash is doing its own research, involving several of these products. They include:
Full skirts that cover the running gear. Wabash is conducting wind tunnel testing as well as field testing and computer modeling of full-length DuraPlate skirts. Based on early results, the company estimates that these designs could provide up to a 10% improvement in fuel economy.
Variable ride-height suspensions have the potential of reducing aerodynamic drag by positioning the trailer lower to the ground.
Using the fifthwheel to close the gap between the tractor and trailer. Giromini said that a joint research project between tractor, trailer, and fifthwheel manufacturers could develop a fifthwheel that could bring tractor and trailer closer together once a certain speed is achieved.
“We have a long way to go in this area, but we are well on our way,” he said.
One way to save fuel is to use a system that does not require any. With that in mind, Wabash is looking into the use of nitrogen in refrigerated trailers. He says nitrogen provides a significant improvement in overall fuel costs and offers other operational and environmental benefits.
“This type of technology has a great deal of potential for certain types of hauls such as radial distribution,” Giromini said. “It runs silently, generates zero greenhouse gases, and eliminates the need for diesel-powered refrigeration units. There is more work to be done, but it is very promising.”